New Delhi: With the active support and engagement of the Ministry of Petroleum & Natural Gas, Government of India, in the resolution of the issue of VAT deferment for Indian Oil Corporation’s Paradip Refinery in Odisha, IndianOil has paid Rs. 2,935 crore to the Government of Odisha today towards VAT payment for the period Nov. 2015 to July 2017. The Refinery had commenced commercial operations in November 2015.

A meeting held a month backbetween the Chief Minister of Odisha and the Union Minister for Petroleum & Natural Gas helped resolve the pending issue, and an amicable solution was arrived at in line with the Hon’ble Prime Minister, Shri Narendra Modi’s vision for the overalldevelopment and industrialisation of Eastern India, including Odisha. The Government of Odisha agreed to extend the deferment of VAT on products produced by Paradip Refinery and sold in the State from 11 to 15 years but with a cap of Rs. 700 crore per year.

Based on the follow-up discussions held in the Joint Working Group under the Chairmanship of Secretary (Petroleum), and consisting of senor representatives of IndianOil and the State Government,it was agreed that Odisha Government will henceforth receive regular VAT/GST revenue from IndianOil, out of which Rs. 700 crore per annum will be given as interest-free loan to IndianOil for 15 years.

Complimentingthe Government of Odisha and IndianOil for agreeing on a middle path and a mutually acceptable solution,Union Minister for Petroleum, Shri Dharmendra Pradhan, said that the new arrangement will give a big boost to industrial growth in Odisha.

IndianOil’s investment of over Rs. 40,000 crore in Paradip Refinery and allied facilitiesis the single largest investment by a corporate in Odisha. Further investments are in the offing, including expansion of refining capacity, and downstream petrochemical options like Polypropylene, Mono Ethylene Glycol, Paraxylene, Petcoke gasification, etc., which will go a long way in the development of Odisha as a petrochemicals hub.

Shri Pradhan urged the State Government to facilitateIndianOil’s expansion plans in order to create downstream petrochemical and allied industries in Odisha. Over a period of time, this will enable the State to increase its revenue and also create additional employment avenues for the youth of the State. It will also lay the foundation for a new industrial ecosystem, facilitating industrialisation and fiscal consolidation, he said

IndianOil had in 2004 signed a binding Memorandum of Understanding with the Government of Odisha whereby the State Government extended several incentives to IndianOil for setting up Paradip Refinery. One of the major incentives was in the nature of interest-free loan equivalent to the sales tax/VAT payable to the State of Odisha on sale of products during the first 11 years’ operation of the refinery from the date of commencement of commercial production. IndianOil commenced the construction of the refinery in March 2009 and started commercial operations in November 2015.

After completion of the Refinery, the State Government decided to review the fiscal incentive and withdrew it citing reasons of delay in completion of the project, favourable economic conditions and increase in the size of the refinery from 9to 15 million tonnes per annum.

IndianOil approached the High Court of Odisha against the withdrawal of thefiscal incentive. The High Court granted a stay in favour of IndianOil and asked both the parties to settle the issue through a Joint Working Group.

With a project cost of Rs. 34,555 crore, Paradip Refinery project has been source of direct and indirect employment to a large number of professionals and labourers right from the project phase. Approximately 5,000 contract labourers are deployed on the project, including construction, operation & maintenance activities at the Refinery and associated Pipelines & Marketing Installations at Paradip.